Sunday, October 31, 2010

So there is a name for that!

I stumbled across a great little vocabulary lesson on Aid Watcher: Aid Fungibility:

Aid Fungibility is when the Donor gives the Government Aid for Good Thing A and refuses to fund Bad Thing B. The clever Government then reduces its own spending on Good Thing A one for one with the aid, so that total spending (Donor + Government) on Good Thing A is unchanged. The government uses its savings on A to spend more on Bad Thing B. So de facto (compared to the pre-aid situation) the Donor really has no effect on A and only has the effect of increasing total spending on Bad Thing B.

Fungibility is why giving homeless people food instead of money simply frees up the dollars they do have for alcohol, if they so choose. It's why a bond issue to make a state university more eco-friendly simply means the school doesn't have to pay for the "green" technology they were going to get and funnels that money into other boondoggles. It's why buying food for a poor nation is really an indirect purchase of AK-47s for the dictator's goons.

I was talking to a relative recently about why her support of casinos that give money to school departments are no different from casinos that give money to SWAT teams, and I failed to explain it as neatly and concisely as William Easterly did, or the World Bank economist who said "It’s when we think we’re financing a power plant, and we’re really financing a brothel."